fraud prevention Question And Answer
Discuss Fraud prevention in Accounts Department?
Let's say in an organization or a company, how can one prevent fraud
Answers
The structure of accounting with its checks and balances is largely set up to mitigate certain types of fraud. Auditing is the function of reviewing the accounting methods and results and is the way most frauds are exposed.
It's about the different types of control that are in place. Things such as who has signature rights for what, passwords in place for sensitive files. I'm sure you can find more info by Googling this question.
1. Segregation of duties - do not have one person do alot of things in a certain area
2. Internal control system - ensure that individuals are restricted, based on their level, from accessing certain areas, performing different functions, and overriding the internal control system.
3. Establish ethics and conflict-of-interest policies
4. Avoid management pressures and incentives
5. Background checks of management and executives
6. Avoid electing directors with significant equity ownership and little experience
7. Avoid family relationships among directors and officers
8. Staff internal auditors and have regular and thorough internal audits (this is hard to do since many internal auditors do not like repetition and the pay is minimal).
9. Implement a whistle blower process or hotline
10. Implement a document retention policy and inform employees of this.
11. Learn generally accepted accounting principles (GAAP)
12. Conduct an external audit, yearly.
